What real estate lessons can be taken from our past? Today I’ll share five things we learned from the 2007 crash.
We all remember what happened in 2007. The financial crisis during this time taught a lot of lessons that I wanted to talk about today. There is an old saying that wise people learn from other’s mistakes but smart people learn from their own. If you did not buy a home then, you can learn from the people who did. And, if you were one of the people who did buy a home then, you must learn from that mistake.
- Do not buy a home that you cannot afford. If you’ve been pre-approved for a monthly payment that would stretch your budget too thin, the home you’re looking at may be out of your price range. Even if you can technically afford the monthly payment estimated on your pre-approval, it’s important to consider other expenses you might encounter over time. If your finances are too tight, you may struggle to afford leisure activities or to take on other unexpected expenses.
- Your home will not always go up in value. I have started to see people in the last year or so delay listing their home because they think that if they wait to sell the value will go up next year. If you are looking to sell, timing the market absolutely perfect is a tough thing to do. So you may want to sell when the time is right and not necessarily when you think you will get the highest amount.
- Make sure you have adequate reserves. The money you put toward your down payment, or toward remodeling your new home, shouldn’t leave you without any leftover savings.
- Have a big down payment. If you can submit a larger down payment, do it. Most people only stay in their home for around seven years. But leaving after this amount of time can be a mistake, because for the first few years of a 30-year loan, homeowners are essentially paying down interest. By the seven-year mark, most have only just begun to get out of all that interest. So leaving at this point causes homeowners to miss out on equity.
- You should buy low and sell high. 2010 was pretty much the bottom of the market. Foreclosures and short sales hit the market because rampant fear drove prices down by 60% to 70%. Now, with seven years of recovery, we are seeing all-time highs. Hindsight is 20/20 and even though it is difficult to time the market, it is a great time to sell now.
If you have any additional questions or are interested in buying or selling, please feel free to contact me. I would be happy to help you.